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Operator: Thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's financial results briefing for third quarter of fiscal year to March '26. First of all, allow me to introduce the attendees today. Mr. Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer.
Noriya Kaihara: Good to see you, everyone.
Operator: We have Mr. Eiji Fujimura, Director, Managing Executive Officer.
Eiji Fujimura: Thank you.
Operator: And Mr. Masao Kawaguchi, Operating Executive Head of Accounting and Finance Unit.
Masao Kawaguchi: This is Kawaguchi, good to see you, everyone.
Operator: Mr. Kaihara will first present the financial results of third quarter ended December '25, and forecast of consolidated results for the fiscal year ending March '26. Then Mr. Fujimura will present the details. Over to you, Mr. Kaihara.
Noriya Kaihara: Thank you very much for your continued support for Honda's activities. I would like to present to you the financial results for the third quarter of fiscal year to March 2026. I would like to start with the highlights of the financial results. Our operating profit for the third quarter of the year to March '26 was JPY 591.5 billion. Motorcycle operations saw solid global unit sales led by India and Brazil. And in addition, the restriction on ICE vehicles in Vietnam, which was a concern, had only limited impact to sales compared to our assumption. For results up to third quarter, we've attained record high unit sales, operating profit and operating margin. Automobile operations saw declines in profit due to nonrecurring expenses related to EV in addition to impact from tariffs. Operating cash flow after R&D adjustment, which indicates the resource available for future investments, came to JPY 1.8558 trillion, generating cash on par with the same period last year. The forecast for the consolidated results for the term ending in March '26 is operating profit of JPY 550 billion and profit for the year of JPY 300 billion, unchanged from the previous forecast. Impact from tariffs were initially forecast at JPY 450 billion at the beginning of the term, but our prospects are now that it will be reduced to JPY 310 billion. Toward the end of the term, though we expect growth in profit due to yen depreciation, the competitive environment for automobiles in Asia will intensify requiring incentives. Taking into consideration uncertain business environment, we are maintaining the previous forecast. Going by business segments, for motorcycle operations, with the tailwind of solid sales in India and Brazil, we continue to aim for 21.3 million units, the highest record sales. For automobiles, we will maintain the forecast of 3.34 million units, unchanged from last forecast. The shortage of semiconductor supply experienced in third quarter now has good prospects for preventing recurrence. On the other hand, we are beginning to see signs of supply risk for other materials such as rare earth metals and memories, and we will closely monitor the situation and take actions as needed. To give you the consolidated results for the third quarter of the year to March '26, operating profit was JPY 591.5 billion, lower by JPY 548.4 billion compared to the same period last year. Investment earnings due to the equity method was JPY 24.0 billion, higher by JPY 51.3 billion. And the quarter profit attributable to the owner of the parent was JPY 465.4 billion, lower by JPY 339.8 billion. Next, I'd like to cover the forecast for the consolidated results for the term ending March '26. Compared to the previous forecast, we maintain our forecast of operating profit of JPY 550 billion, and then the profit of the year attributable to the owner of the parent of JPY 300 billion, which is unchanged. The exchange rate against the U.S. dollar is assumed at JPY 140 (sic) [ JPY 148 ] for the full year period. Next, for shareholder returns. Forecast for the full year dividend for the fiscal year ending March '26 is JPY 70 per share, unchanged from the previously published forecast. In addition, the Board of Directors meeting held today has resolved on cancellation of treasury stocks. We will execute cancellation of 747 million treasury stocks. So let me explain about the details of the financial performance, and Mr. Fujimura is going to explain. Let me start. So regarding cumulative group unit sales for 3 months (sic) [ 9 months ] up to the third quarter year-on-year, for motorcycles, 16.44 million units sold due to the increase in India, Pakistan and Brazil. For automobiles, 2.561 million units due to decline in Asia, mainly in China. And for power products business, 2.507 million units sold due to some incremental sales in Europe and decline mainly in Asia. We have explained the consolidated performance up to the third quarter already. Next, I will explain factors for changes of operating profit year-on-year. Operating profit was JPY 591.5 billion, down by JPY 548.4 billion year-on-year. Factors behind for changes. Sales made a positive impact by JPY 38.1 billion because of the increase in motorcycle unit sales as well as profit in financial businesses, though automobiles unit sales declined due to the shortage of semiconductor supplies. Price/cost impacts were positive by JPY 225.9 billion due to effective price revisions. Expenses impact was negative on profit by JPY 108.6 billion. R&D impact negative by JPY 35.7 billion. Foreign currency impact negative by JPY 111 billion. Onetime EV-related expenses impact negative by JPY 267.1 billion. And the tariff impact squeezed the profit by JPY 289.8 billion. Excluding onetime EV-related expenses and the tariff impact, the operating profit would be JPY 1.1485 trillion. Regarding operating profit by business segment. Motorcycle business, JPY 446.5 billion (sic) [ JPY 546.5 billion ] operating profit. Automobile business, JPY 166.4 billion losses. Financial service business, JPY 218 billion profit. And the power products and other business, JPY 6.5 billion losses. Operating profit of motorcycle business increased by JPY 44.8 billion year-on-year to JPY 546.5 billion. Factors for changes. Sales impact was positive JPY 61.2 billion due to incremental sales units, mainly in Asia and South America. Price/cost impacts were positive by JPY 48.6 billion due to effective price revisions and so on. Expenses impact negative by JPY 24.1 billion. R&D impact was positive by JPY 4.6 billion. Foreign currency impact negative by JPY 37.7 billion. And tariff impact negative by JPY 7.7 billion. Operating profit of automobile business went down by JPY 569 billion year-on-year, resulting in the operating losses of JPY 166.4 billion. Breakdown of factors for changes. Sales had a negative impact by JPY 82.8 billion due to unit sales decline, mainly due to semiconductor supply shortage, losses associated with the reorganizing of the affiliated company of the group and so on. Price/cost impacts had a positive impact by JPY 177.3 billion due to effective price revisions. Expenses had a negative impact by JPY 11.7 billion. R&D impact, negative by JPY 42.1 billion. Foreign currency impact negative by JPY 62.9 billion. Onetime EV-related expenses had a negative impact by JPY 267.1 billion. And the tariff impact was negative by JPY 279.5 billion. Cash flow situations now. Free cash flows, excluding financial service business, was JPY 917.4 billion. Net cash as of the end of third quarter was JPY 3.1707 trillion and the operating cash flows after R&D adjustment was JPY 1.8558 trillion. Let me explain consolidated forecast for FY ending March 2026. Regarding group unit sales, we will keep the previous forecast of 21.3 million units of motorcycles, 3.34 million units for automobiles, and 3.67 million units for power products volume. And we have already explained the consolidated financial forecast for FYE March 2026. As for factors for changes in operating profit year-on-year for those forecasts, operating profit would be down by JPY 663.4 billion year-on-year. With factors for changes, sales would have a negative impact by JPY 162 billion due to semiconductor supply shortage and so on. Price/cost impact will be positive by JPY 330 billion (sic) [ JPY 230 billion ] due to effective price revisions and so on. Expenses impact, JPY 106.5 billion negative. R&D impact, JPY 166 billion negative. Foreign currency impact, JPY 149 billion negative. And the tariff impact negative by JPY 310 billion. Regarding factors for changes in the forecast of the operating profit, we will keep the previous forecast of the operating profit, for which sales impact will be negative by JPY 10 billion. Expenses impact negative by JPY 15 billion. R&D expenses impact negative by JPY 40 billion. And foreign currency will make a positive impact by JPY 65 billion due to the change of the exchange rate assumption to JPY 148 for $1. Expected capital expenditures, depreciation, amortization and R&D spending of FYE March 2026 will be as follows, reflecting increase in CapEx for acquisition of factory buildings and so on of the battery production JV with LG Energy Solution. Lastly, I would like to speak about the future direction of our operations in view of the current business environment. For automobiles operations, with the expertise we have accumulated on internal combustion engines and hybrid technologies, our results of the third quarter confirmed that we are maintaining a business environment -- business characteristics that continually give us profit if we exclude the nonrecurring impact from EV and impact from tariffs. On the other hand, we are faced with issues, including stagnated growth of EV market, less stringent environmental regulations in different country markets, retreat of multilateral free trade system due to protectionist policies, heightened supply chain risk due to expansion of global procurement, further exacerbated by intensifying global competition from emerging OEMs. Thereby, we need to conduct a fundamental review of our strategies to rebuild our competitive strength. In this situation, we believe that our current tasks are to build lean business characteristics to enable flexible actions against changing business environment and to realize product features and cost competitiveness that overwhelm those of emerging OEMs. To address those issues, firstly, we are working to completely settle, within this fiscal year, the losses related to EVs currently sold in North America. In addition, we are striving to make prompt management decision in line with EV markets, such as disciplined expenditure control, EV product range and review of CapEx plans aligned with the business environment. At the same time, to further enhance the earning capability of hybrid models, we are preparing to launch next-generation hybrid system as well as equipping the hybrid models with next-generation ADAS. We will communicate our review of fundamental medium- to long-term strategy at an appropriate timing sometime during the coming fiscal year. Honda has multiple business domains, including motorcycle and finance business operations, forming a well-balanced business portfolio, each of which help us to generate cash flow and to maintain a sound balance sheet. Because of this, we have adopted a DOE indicator, which allows us to ensure stable returns and dividends aligned with the company's growth even in an uncertain and extremely volatile business environment. Through these initiatives, we will continue to strive to enhance corporate values so that we will remain a company expected to exist in the eyes of our stakeholders. This completes my presentation. I thank you very much for your attention.
Operator: Thank you very much for your attention. So now we'd like to take questions from the audience. [Operator Instructions] Then the first question. This is from Mr. Yokoyama of Toyo Keizai.
Junya Yokoyama: This is Yokoyama from Toyo Keizai. Can you hear me?
Noriya Kaihara: Yes.
Junya Yokoyama: I have 2 questions. First question is I just would like to check your outlook for the full year. You are progressing beyond your budget already. But it is true that the fourth quarter, you tend to get a lot of expenses, but you have been saying that the expenses would be JPY 650 billion for the full year. There was one gap. So I just wanted to check that. And then for the automobile profitability, I would just like to check. There was tariffs impact. If we exclude that, that would be IOS of 3.6%. But if you include hybrid, I think earlier, you mentioned like 8% of profitability. So if you say 3.6%, I thought it was kind of sounds lower. So I would like to ask for your evaluation of the profitability of automobiles and then would like to see what your real values are.
Noriya Kaihara: Okay. Thank you very much for your question, Mr. Yokoyama. First of all, for the specific numbers for that, this will be covered later. But this time, for the fourth quarter, we slided the results from fourth to third quarter. So let me try to answer how we expect the financial results would land toward the end of the year. So compared with the third quarter results, the tariff impact will work on the positive side. And then the motorcycle and automobile unit sales, because we had favorable results in the Vietnam motorcycle -- well, I should not say favorable, but the damage was less than we had assumed in Vietnam. So I think motorcycle, it will go positive compared to our budget. That is our assumption as well. However, for North America automobile market, if you look at that, and then going forward, I believe there will be further impact from BEV. So the sales will become difficult. So we will have to increase a bit of the incentive. That's one thing we are considering. But as a downside, another downside is that so far, we had the BEV with GM. Well, Mr. Fujimura will explain this later. But we need to do this in negotiation with GM considering the compensation. So depending on how that comes out, we might have a little bit more expenses to be covered. So with that, that is why we're giving those numbers as a forecast. And then as the BEV environment, how it develops, maybe the GHG credit, and then in the finance, we might have our losses from a residual value on the lease. So basis of those, we believe we are just assuming for fourth quarter, the outlook is still maintained. Okay. So I would like to ask Mr. Fujimura to give a little bit more details then.
Eiji Fujimura: Okay. Thank you very much for your questions, Mr. Yokoyama. As you mentioned, the negative JPY 650 billion. So, so far, we had a battery EV of negative JPY 650 billion, battery EV, that's what we have been saying. So when we talked about the JPY 650 billion, so the GM-related issues that we talked about, and then of the models that we are developing, let's say, we were doing a review of those models so as to write off certain assets. So with that, we recognized JPY 250 billion, and then JPY 400 billion of R&D. So we put total of JPY 650 billion in the budget. This time, in the results, this is not for the GM portion, but for models in China, because according to the discussions with the partner, we have reviewed our product lineup. Some of the models or some of the development assets, those have been written off. So up until 9 months of this year, we have JPY 270 billion. So that's JPY 270 billion for the 9 months. But if we turn it into budgeted, let's say, amount, it will come to JPY 290 billion, plus JPY 400 billion for R&D. So it is getting close to JPY 700 billion range. So those are the numbers that we have put into the budget. So this JPY 270 billion has already been incurred and then JPY 290 billion for the full year. So the JPY 20 billion remaining, the difference, this is up to the negotiation with GM. So the negotiation with them still has not been established. We have not been offered any number concerning that. So we are assuming -- sorry, we don't know if the JPY 20 billion is sufficient or not. So because of that, looking at the sales situation and then maybe if you think about the exchange rate, that might be upside, but this could be a downside factor. So that is why we are keeping the outlook forecast unchanged. This JPY 700 billion BEV portion, next year -- well, if this JPY 200 billion is no longer there next year, then it will only be JPY 400 billion. That will be the starting line for next fiscal year. But at the end, as Mr. Kaihara explained to you, currently, considering the current EV market, I think we need to rebuild our framework of our strategy. So we'll take this -- well, are we going to really take this JPY 400 billion as a starting point, or are we going to review this? We don't know how much of the disciplined expense cost control is going to be. We are still in the process of formulating those plans. So we hope to be able to issue outlook prospect of that sometime in the future. When it comes to ICE, it was like JPY 900 billion or close to JPY 1 trillion earnings is something we have. However, we do see declines in unit sales in Asia, and we see some impact from exchange rate. And then the semiconductor impact, we are recovering a little bit of that, even though this is onetime. So without the tariff -- that's JPY 700 billion. And then let's say, if there's no tariff, it will be JPY 400 billion. So on the plus. So JPY 400 billion probably would be the starting line. So JPY 300 billion tariff impact, it cannot be recovered just immediately next fiscal year. So we want to closely monitor the cost, so we might proceed with more expanding of our local procurement and try to control costs more closely. I hope that answers your question.
Junya Yokoyama: Well, when it comes to talks about the upside, you are assuming the exchange rate at JPY 148 per dollar. But I think this would go toward the upside, right?
Noriya Kaihara: I think if things progress as things are going right now, yes. As I might have mentioned, so per dollar, JPY 1 would give us an earning plus of JPY 10 billion or so throughout the year, that is, of course. So we slashed up by 4 to get a quarter-on-quarter number per JPY 1 against the dollar fluctuation.
Operator: Next question, please, from Asahi Shimbun Newspaper, Mr. Miura, please.
Hideyuki Miura: Asahi Shimbun Newspaper, Miura. I have 2 questions. One, Page 20, EV market trends with the model lineup prioritization and focus, as we mentioned here. Could you elaborate on that, please, the basic idea and the directions, please explain about that to me. And another question is also on the Page 20 about reorganizing the long and midterm strategies. And please tell us about the directions of those strategies.
Noriya Kaihara: Thank you for your question, Mr. Miura. So EV market and our attitude for that. Basically, BEV market for us are in the North America and in China for North America. The market environment, for instance, there is ACC now validated and credit for BEV, we cannot really see the values anymore today and demand environment for EV is quite negative today for us. And recent EV situation today would be leading to the idea of reorganizing the EV strategies for that market. And then last year, we had some tax credits, and we had accelerated some prior to the September period. However, now the market is slowing down in this end. In that regard, EV strategies in the future have to be revisited. And therefore, China EV market is -- last year, for instance, half of the market share in the China are supported by the EVs or BEV in China. And then in terms of Honda EVs, unfortunately, there are local EV manufacturers over there. And in terms of the prices, UI, UX perspectives, we are not there. We are behind those companies. And then in terms of the competition in the software environment, we are still behind other companies. Unfortunately, we do not have the established image of the business in the EV area over there. So we have to go back to scratch and then rebuild our strategies for EV. For the cost perspective, the local suppliers over there or engineering companies over there, we would have to make use of those present that way. We have to turn our direction dramatically, so that we can then gain our cost competitiveness utilizing them. NOA, ADAS, those will be updated with them, so that we can be competitive again to challenge the markets once again. In that regard, as I mentioned the other day, the timing of the launches will be revisited in order to have our entry once again in the EV market over there. Thank you very much.
Operator: Next question come from Nikkei Paper, Mr. Okinaga.
Shoya Okinaga: This is Okinaga from the Nikkei Newspaper. I'd like to ask about the EV again. So throughout the year, you said JPY 290 billion for the year. Is there a possibility of, let's say, further impairment booking or posting of impairment losses? So that's one question. And the other question is concerning semiconductor. So you said that you have good prospects for preventing recurrence of this shortage problem happening. So I just would like to know what you have been doing. And then JPY 150 billion negative for China. So any impact for Japan and China? So I would like to know how the situation has been for China and Japan.
Noriya Kaihara: Thank you very much, Mr. Okinaga. First, about the EV, the impairment losses for the nonrecurring one. Well, we don't know what's going to happen, but we have been processing this in accordance with the accounting principles. So whatever we know, we have incorporated into our books. However, as mentioned by Mr. Fujimura, we don't know what kind of compensation issues might come up with GM. So there is a bit of an unclear future prospects. And then actually, as I've explained, because the EV market is dramatically changing. So we would need to monitor our sales volume trends. And then we might have to take some actions if needed. Any details you can add?
Eiji Fujimura: Okay. Then if the intention of your question is about the impairment losses for the EV business in general, like at other OEMs, because we are not sure what's happening at other companies, so I would like to refrain from mentioning anything about other companies. But what we are saying is that with the models that we have developed as the die and tooling and then the development R&D assets, some of those have to be written off. And then this is not really impairment, but we would need to do some compensation. So because of the review that we have conducted as a product lineup, we are booking some temporary losses, those expenses that are incurred. But you asked about the impairment, but impairment means that -- this is a CGU that we use. Whether this leads to cash generation in the future, and then how the business environment has been doing, and what management decision has been in view of those. And then in view of all of those, we are getting audited, and then with the auditors included, we discuss. So we are not recognizing any impairment like that have happened in other companies. But we have been talking with the accounting. We have been discussing on a continuous basis. And then we have been discussing how we at management should assess those costs and expenses. So I just wanted to mention that whatever that were incurred up until 3 quarters, those are only those associated with the product lineup review. We don't know if it's going to be enough, but we have included whatever we can so far. And then the second question, you asked about semiconductor. So last year, in North America, from the end of October, we had to go into production adjustment and a production suspension in Mexico. So the impact actually is, I think I mentioned, 120,000 units affected. We hope that we are able to recover a bit. So the affected will be 110,000 units. But it would be JPY 150 billion impact we assume. So of that -- this is unfortunate, but for Japan and China, we have had some disruptions in production. From China, we had about 3 weeks or so from the beginning of the year -- end of the year, sorry. And then for Japan, we have had to suspend production like at Suzuka for 2 or 3 days, and then did some production adjustment for a few days after that. So because of that, even though there was an impact once, but for Japan and China, we have the capacity to sufficiently recover. So we will be able to complete the recovery of those lost production before the end of this fiscal year. So in terms of business impact, it is very limited. So we have not considered that into our business. But anyway, we have faced those problems. So basically to the suppliers, so I'd say, we are trying to do a multi-sourcing of the suppliers, and then we have been asking them to keep appropriate inventory levels. However, some of the suppliers, unfortunately, have not provided us with that much of the details. So to be blunt, we have been relying heavily on our suppliers. So that's something we are reviewing fundamentally, so that we will keep a close watch over our supply chain all the way up to upstream and then see what kind of risk there may be, and then we will do appropriate risk assessment and then keep appropriate inventory management or go multi-sourcing as well. And then that needs to be done from the development stage as well. So at the earlier development stage, we have been looking at the cost sourcing. Well, in view of that, there are some single-sourcing strategies as well. But in terms of business continuity strategy, if we go single-sourcing, we will pay careful attention to upstream of each of those components containing semiconductor, and then we will decide how much of inventory we will hold. And then we will do a review about what is going to happen if we go multiple sourcing and then take actions accordingly. Currently, as you may know, the semiconductor issue, in addition to what we have experienced so far for the memory and then, of course, the rare earth issues are there. We are aware of those. So when those issues arise, we would -- of course, at this point in time, I don't think there is anything that would lead to immediate problems right now. But in the future, of course, well, it is not very clear. So we will work closely together with the suppliers and take actions as needed. However, for the rare earth metals, it is nothing that one single corporate entity can do anything about. As you may know, at the JAMA level as well, this is being discussed. And also with the governmental agencies included, this needs to be reviewed. So we would like to deepen our collaboration with different entities. Thank you very much. This concludes my answer.
Operator: Next question, Ms. Ukita from Yomiuri Newspaper, please.
Rina Ukita: Ukita from Yomiuri Newspaper. I have 2 questions. One is about tariff impact. Little by little compared to the start of the year, it is coming down. It is down from the JPY 386 billion from the beginning now. And could you tell me more about the reasons behind this? And then the other question is about sales situation of the automobiles. Your target is there, but it's not achieved. And in order to achieve the target volume of the sales, what are you going to do with the Japan and North American market?
Noriya Kaihara: So tariff, Mr. Fujimura is to address.
Eiji Fujimura: Thank you very much for your question, Ms. Ukita. And as you said, until last time, a gross impact in the first half, JPY 385 billion impact expected because of tariff, and the recovery of the cost expected JPY 50 billion. And then JPY 338 billion (sic) [ JPY 335 billion ] net impact. And then 110,000 units reduced in the U.S. because of the semiconductor situation. And then including that, JPY 338 billion net actually is because of the foreign exchange and so on, it will be about JPY 360 billion. That's the actual gross and JPY 50 recovery. So net was JPY 310 billion impact incorporated in the accounting. And then the recovery part, they were realized. Therefore, JPY 310 billion, this is the number finalized, let's say, for this. And what kind of recovery plans are incorporated in the JPY 50 billion? And with the suppliers and others, we had made adjustment looking at the logistics and so forth. And then additional local procurements were progressed as well to achieve USMCA, and we are more confident in achieving that. Plus within U.S. credit, utilization is also to be added. And we scrutinized how far we can incorporate from that, and we had a broad consideration. And then eventually, JPY 50 billion recovery plan is realized into the JPY 310 billion figure.
Noriya Kaihara: And as for the sales strategy, let me address that question. For the North America, as I mentioned a little earlier, IRA credits were pushed toward the end of the period, and it was included in the BEV drops quite dramatically. Therefore, going forward, it will be staying at a very low level. And then going forward, we have to be focusing on the hybrid brand, taking advantage of the brand to make sure that those models will be selling more. And then as of today, in North America, various companies had the impact of the tariff. And then we were thinking that they will be increasing the selling prices. However, we do not see the dramatic selling price increases. And then we had seen some incentives utilized in the different areas. And then the actual prices on the decreasing trend, practically speaking. Therefore, we have to use incentives. At the same time, we have to appeal the hybrid models. And customers who are looking for the affordable models, the ICE models can be provided to. So we try to cater for the needs of the customers to try to get by the situation here. And together with the dealers, we have to do the marketing activities. And we were not really focusing too much. However, in the area of the fleet, which was not really focused before. We have to work on that to sell more cars in the fleet customer field. And Japan, hybrid models, that is very focused in the Japanese market. In Japan, rather than the competition, I think it is more of the customers and how we can include and support those customers. The dealers will make sure that they have a close contact with the customers, for instance, one-on-one strategy, one person looking at one customer, one-on-one strategy to try to satisfy their needs for sure. And that is very down to the ground activity, let's say, but it is what we are up to. And then next year onward, MMC and other campaigns expected to try to maintain the market share or improve the market share with those plans.
Operator: The next question come from NHK, Mr. Yasunaga.
Hiroshi Yasunaga: This is Yasunaga from NHK. One question. The rare earth metals supply concern, concerning that explanation. So there is an export restriction on China. Is my understanding correct? And also about the diversification of supply chain. So for rare earth metal, you have no choice but to rely on China. But what would be your appropriate action in response to this situation?
Noriya Kaihara: Okay. Thank you very much, Mr. Yasunaga. For the rare earth metal concern, yes, as you said, currently, rare earth metal, those are subjected to export restriction from China. But currently, are the exports stopped? No. All we can do is apply for exports, and we do see those exports coming through. But sometimes it just takes some time, a longer time. So if you ask us, can we get the exports coming through as expected, not really. So as you know, rare earth metals, those are used in different various components. So if the supply stops, the risk is high. So we need to ensure, as I mentioned, we need to apply without any delay, apply for permission for exports. And then, of course, when it comes to fundamental countermeasure is to go without use of rare earth, but that will take a long time for development. So currently, we will take some parts that are difficult to switch over or take a longer development. All we can do is to simply hold inventory. But currently, we don't have any actual problem in the supply. But how is it going to be in the future? We don't know. It is very uncertain, as I mentioned. So the supply, we need to work closely together with our suppliers, get interviewed them, and then ask them what kind of supply chain our supplier have for the rare earth that's needed for their components. So we will continue to consider our permanent or long-term countermeasure. And this will be for more medium term, but we will consider development of parts and components that do not use the rare earth. But for the time being, all we can do -- the first thing we can do is to secure inventory. And then also secondly, to apply for export permissions on a timely manner. So those are the things that we can do currently. I hope that answers your question.
Hiroshi Yasunaga: This rare earth-free components, specifically, what kind of components do you have in mind? And where would be the real critical point?
Noriya Kaihara: Well, there are different components, but there are different types of rare earth. So some are used in motor, some used in meters. So for each and every component that uses rare earth, for every one of them, we are looking into what can be done to replace them without rare earth.
Operator: Ms. Nagai from TV Tokyo.
Unknown Attendee: Question one about the third quarter alone sales in the period for automobiles. Excluding the automobile sales, you had a reduction of the volume. And excluding the impact by the semiconductor, what is the situation as compared to the expectations in the beginning of the year? And the second question is about Page 20. As Kaihara-san said, the direction of the businesses going forward. You said that it is going to be a dramatic revisiting of that. And as I heard about incentives in the North America, there could be kind of limitation to improve the profitability by doing by itself alone, but I suppose that you're still speaking to Nissan or Mitsubishi, not just those 2, I thinking about possibility of the collaboration with other companies other than those 2.
Noriya Kaihara: Thank you very much, Ms. Nagai, for your question. And 3 months volume, right? That's your question, right?
Unknown Attendee: Yes, correct.
Noriya Kaihara: And then volume, you mentioned that the volume had declined for the period year-on-year, I suppose. But for the automobiles, actually, the volume sales increased as compared to the plan for the automobile businesses for the third quarter. You're comparing from same time last year, right? And for the original plans, third quarter, we had actually overachieved the plan for the third quarter automobile. And as compared to last year, it declined because of the next 3-year semiconductor impact that is the largest, and also Chinese market for ICE. EV -- NEV market is increasing or expanding in China and ICE market is shrinking in China, because of which volume in China is in a tough situation. So year-on-year, it dropped. That is about the volume. And what was the next question? Alliance question, right? And Nissan Alliance. Well, actually, with Nissan, the integration possibility, we do not talk about that at all now. And I have to say that. And another thing is that as you said now, development cost will be needed in the future, for instance, software, architecture and so forth require investments. And for the future EVs, batteries, e-axle, if we can commonize those or have a co-development together, that will help reduce the development cost, or cost itself may reduce, thanks to that. However, for those matters, we continue to discuss with Nissan. However, not just Nissan, if it is possible to build a relationship like them with other alternative companies, of course, as long as we can expect a win-win results altogether, of course, for those, we will continue to consider other possibilities. And that is all for your question.
Operator: Our next question from Mr. Fujiwara from Nikkan Jidosha Shimbun, Daily Automotive Newspaper.
Unknown Attendee: This is Fujiwara from Daily Automotive Newspaper. I have 2 questions as well. My first question is about the automobile, the factors for press. You had a big contribution from the selling cost that helped to grow your revenues. So I wanted to know what region and what products. And then second question. This may have been covered by Toyo Keizai's question, but the hybrid volume has grown by about 5% in the third quarter. So I would like to know what kind of contribution this 5% growth of HEV volume in the third quarter?
Noriya Kaihara: Okay. Thank you for your questions. This is from year-on-year comparison, I believe. Sorry, the selling price and cost impact that work to the plus, that was for automobiles, there was a bit of a plus in the selling price and cost impact. If we look at the total graph, it's about JPY 60 billion. There was about JPY 40 billion for automobiles, because this is from selling price impact. When we say selling price, per year, at the beginning of the term or in fall, we do go through price hikes. So of the JPY 40 billion or so, about half of it happens in the States. And then for the other regions, those are just prorated -- if you can prorate it to different regions by the volume. And then the hybrid volume for the third quarter, for the hybrid, the unit sales in the states -- well, particularly in the states, hybrid is doing very well. And then how we do the incentive, incentive can be kept low relative to the ICEs. However, the competitors are coming into the hybrid market. So our favorable condition, of course, is not going to last forever. So on our part, we will be getting into the transition period for different models. Our competitors are going to come up with new models. So we need to kind of maybe build up -- spend some more incentives. But the hybrid requires relatively lower incentive compared to petrol engines. But in the future, we might have to spend some more incentives in the future. But on the other hand, for the petrol, gasoline engine vehicles, so we do need incentives more than hybrid for ICE. However, if you look at the contents of the components, gasoline engine requires less tariff impact. So in that sense, petrol engine, gasoline engine contribute better. So we need to strike a good balance between those 2 groups. And then recently, if we look at the transaction -- one of the reasons why transaction prices are deteriorating in the States is that the model type variants which cost lower are attracting customers. So because we do have both gasoline and hybrid, we need to strike a good balance. And then we need to survive through this transition period between those different models using those good mix.
Operator: So due to time, the next question will be the last one for the day. Mr. [ Tsurumi ] from Mainichi Newspaper, please.
Unknown Attendee: Earlier, you talked about the alliances with Nissan. And based on the reports, the models in the U.S. with Nissan and powertrain commonization and so forth. You talked about that earlier. And what is the progress today? Are there any updates for us as much as you could share with us? That is all for me.
Noriya Kaihara: Thank you for your question. So in conclusion, there is no specific information I can share with you today. But with Nissan, as I said earlier, in many different field areas, we try to explore different possibilities. And as you said, the complementary supply of the models or production, the models from each other. If those are complementary to the other company, we could look for the possibility, and also one company produce a model of cars and then provide or make supplies. We have discussion about it. However, we have not decided on any specific plans yet. We simply continue our discussion. And then as I said earlier, the commonization of the software or architectures, such topics are, of course, one of the discussion topics for the development. However, both of us have made progresses in individual projects. Therefore, it is not yet the time to make a conclusion yet, but we continue to discuss positively with each other. So once any output or plans are solidified, we will make sure that we will share with you.
Operator: Thank you. So now that concludes our press conference for the business performance results. And those materials and handouts are available from our website of Honda. Thank you very much for your participation, everyone. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]